Stock (Symbol) |
Upstart (UPST) |
Stock Price |
$203 |
Sector |
Financial |
Data is as of |
August 15, 2021 |
Expected to Report |
November 9 |
Company Description |
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Sharek’s Take |
![]() The company offers a cloud based software package that allows banks to process and (perhaps) approve loans, then keep them or sell them. Upstart began as a personal lender, then decided to sell its technology to banks and credit unions to reduce risk by using AI to determine a borrower’s creditworthiness when doing personal loans. In March, management announced its acquiring Prodigy Software, a cloud-based automotive retail software developer. This makes for an easy expansion into auto loans, which the company began originating in September 2020. Overall, Upstart claims it saves borrowers $72 per month using its system. Here’s the process:
Upstart stock is red-hot, and for good reason. Profits are expected to climb from $0.23 last year to $1.08 this year. The stock also has one of the highest Estimated Long Term Growth Rates within the stocks we cover, 89%. But there is risk that this “new” AI method of processing loans might lead to higher charge-offs down the road. Fortunately for Upstart investors, 97% of revenue is fees from banks or servicing, so the company has little credit exposure. Also, more than 80% of revenue comes from 1-2 banks. Last quarter I called Upstart a speculative stock, but last qtr’s exceptional results today don’t just happen. This company is for real. As the CEO mentioned in the earnings call “Upstart has an opportunity to become one of the world’s largest and most impactful FinTechs in the years to come”. Upstart is part of the Aggressive Growth Portfolio. I doubled my position last week after the company reported earnings. I will now add UPST to the Growth Portfolio today. This company just went public last year, and used a traditional IPO instead of a Special Purpose Acquisition Company (SPAC). |
One Year Chart |
![]() The P/E of 188 is down from 202 last qtr, and 242 2QtrsAgo. UPST is in its infancy, so profits are just starting to come in, thus I am pricing the stock on a price-to-sales basis instead of the P/E anyway. |
Earnings Table |
![]() Annual Profit Estimates continue to climb. Especially this qtr, as 2021 estimates jumped from $0.62 to $1.08. Qtrly profit Estimates are for 123%, 186%, 41% and -40% profit growth the next 4 qtrs. My guess is the company will continue to beat estimates. Note: Transaction volume dropped like a rock in the year ago period. So, let’s not get too excited about this qtrs growth. For example, during the past 6 qtrs, Transaction Volume has been: |
Fair Value |
![]() UPST currently sells for 22x 2021 revenue estimates of $725 million. My Fair Value is 25x revenue, which works out to the following: Current: 2021 Fair Value: 2022 Fair Value: |
Bottom Line |
![]() The Prodigy acquisition has gotten the the company firmly entrenched into the automobile loan market. Up next, home loans. And while Upstart evolves, the the Total Addressable Market (TAM) grows. The TAM for Personal loans is $84 billion, Auto & Personal loans are $635 billion, and U.S Consumer Credit (which includes Auto and Credit Cards) is $4.2 trillion. Last week, UPST was moved up from 14th to 1st in the Aggressive Growth Portfolio Power Rankings. Today, the stock will be added to the Growth Portfolio today and will rank 16th in the Power Rankings. |
Power Rankings |
Growth Stock Portfolio
16 of 38Aggressive Growth Portfolio 1 of 34Conservative Stock Portfolio N/A |